State Could Lose Federal Health Funds : Nursing homes: Up to $1 billion could be withheld because of refusal to provide money required under new U.S. rules, official says.

California is in danger of losing $1 billion in federal funds for the care of 70,000 nursing home residents because the state refuses to provide additional money to improve care under new federal rules, a top U.S. official said Monday.

California nursing home residents “are entitled to the same protection as people in all the other states,” said Gail Wilensky, head of the Health Care Financing Administration. State officials “told us they don’t have the money but we are not about to set up a different set of rules for California,” she said.

Angry state officials insist that California has an effective system of regulation assuring top-quality care in nursing homes and contend that the new rules, which took effect Monday, are simply administrative details.

The state and federal governments each pays half the cost of nursing home care for indigent patients. The improvements for which the state has refused to pay include having a nurse available 24 hours a day and offering dental care, Wilensky said.

Individual nursing homes whose contracts with the federal government expire as early as December will be ineligible for federal funding if they do not comply with the new federal rules, Wilensky said.

Without the additional state funds, the nursing homes would be forced to dip into their own cash or raise sharply the fees charged to residents who pay for their own care.

California could lose all Medicaid funding for nursing home patients in three or four months unless the state agrees to spend the money needed for better care, she warned.

The federal government never has cut off a state’s funding. Before any final federal action to cut funds, it is likely that nursing home residents or operators will sue the state to force compliance with the law, Wilensky said.

Meanwhile, Washington and Sacramento are on a collision course.

“We don’t want to adopt the new federal paper work--it would cost $400 million to $600 million and add nothing to the quality of patient care,” said John Rodriguez, deputy director of medical care services at the state Department of Health Services.

California has more extensive training for nurse aides than is required under the new federal law and requires 24-hour nursing service except on weekends, said Teresa Hawkes, deputy director for licensing.

The state Legislature in August added $100 million in funds for patient care, saying that would be sufficient to put California into compliance with the law. The state refuses to take any further action.

From the federal viewpoint, this is an unacceptable act of defiance.

Several months ago, the state pulled its survey teams out of training programs run by the federal government to explain the new rules, saying that the training was unnecessary because California already was obeying the law.

Because of the refusal to cooperate, Wilensky said, Washington will withhold $5 million in funds that would have been used to help pay for surveys at each nursing home to assure acceptance of the new regulations.

“This is very distressing and a very serious matter,” Wilensky said. “We do not like being on a collision course.”

California spends $2 billion a year on nursing home care under the Medi-Cal program, which helps pay the medical bills for the poor, and is reimbursed half that amount by the federal government.

The state has an $8-billion Medi-Cal budget and spending jumped $900 million this year as the state expanded emergency care services to illegal aliens, increased payments to hard-pressed hospitals, and increased the number of eligible poor women and children. In August, the Legislature said that rising overall costs prevented greater funding for nursing care.

“We’ve been doing better than the federal government (in setting nursing home standards) for 12 years, and we’re not getting any credit for it,” said Hawkes. “We pay on a 50-50 basis and we expect to be equal partners.”

Linda Keegan, a spokeswoman for the American Health Care Assn., an industry trade group, said nursing homes are “caught in the middle.” If federal funds are cut off, “ultimately the residents are the ones who are hurt.”